US stocks pretty much spun their wheels Tuesday with indices finishing essentially flat. Although some trades appear to be taking profits, this has been offset by new capital coming in to chase the rally. Declines were broad based across sectors leading decliners were telecom, energy, real estate, health care. Tech and utilities only marginal gainers.
Today’s Asia Pacific session has the potential to be more active with China trade numbers and Japanese GDP both of which have the potential to move equities, commodities and currencies across the region.
Sterling spent the day under some pressure as the House of Lords passed another amendment to the Brexit bill related to giving Parliament the power to reject a deal and send the government back to the bargaining table. Wednesday is Spring Budget Day in the UK with traders looking for signs or what impact Brexit has had on government finances so far and what measures if any may be brought in to support the economy through the Brexit process.
Wednesday also brings the first US budget reports. Following comments from Fed Chair Yellen that the Fed plans to review employment and inflation trends in the US with the potential for a rate increase at next week’s meeting, this week’s ADP and nonfarm payroll reports for February in the US could attact a lot of attention.
Last month’s January reports revealed a surge in hiring to start the new year with ADP private sector payrolls increasing 246K and nonfarm payrolls increasing 227K way above street estimates of 168K and 180K respectively.
The street is currently expecting to see a retrenchment in hiring as shown by the consensus estimates for ADP payrolls of 189K and nonfarm payrolls of 190K. I think that the street is being overly pessimistic. US jobless claims have remained low, economic data has remained positive and the oil price has held above $50 helping one of the more depressed parts of the US economy to recover.
Based in this, I am thinking about 210K for both. I think that it would take a report below 150K for traders to rethink expectations for a US interest rate increase this month. Also note that average hourly earnings are expected to grow 2.8% over year up from 2.4% last month. Rising wage pressures may also increase pressure on the Fed to raise interest rates sooner rather than later.
There have been no major economic announcements after the US close today.
Significant announcements released overnight include:
US trade balance ($48.5B) as expected vs previous ($44.3B)
Canada trade balance $0.81B vs street $0.75B
Canada Ivey PMI 55.0 vs street 58.5 and previous 57.2
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
8:50 am AEDT Japan GDP street 1.5% vs previous 1.0%
TBA China trade balance street $27.0B
TBA China exports street 14.0% vs previous 7.9%
TBA China imports street 20.0 vs previous 16.7%
7:00 am GMT Germany industrial production street (0.6%)
12:30 pm GMT UK Spring Budget
8:15 am EST US ADP payrolls street 189K vs previous 246K
8:15 am EST Canada housing starts street 200K
10:30 am EST US DOE crude oil inventories street 1.3 mmbbls
10:30 am EST US DOE gasoline inventories street (2.0 mmbbls)
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